As applications increased, selection was bound to become subjective: Former Coal Secy Parakh

Former Coal Secretary P C Parakh, who has had an illustrious career in the government, grabbed the headlines in the latter half of last calendar, but for all the wrong reasons. The news was out that, as the coal secretary, in 2005, he had warned Prime Minister Manmohan Singh that this ministry was being run by the coal mafia. Late last year, Parakh was accused by the Central Bureau of Investigation of conspiracy and cheating and helping HINDALCO supremo Kumar Mangalam Birla in landing two coal blocks in Odisha. Parakh started out as a mining geologist at the National Mineral Development Corporation and Hindustan Mining Corporation before joining the IAS in 1969. A native of Rajasthan, after graduating from IIT Roorkee, he was allotted to the Andhra Pradesh of the IAS. He became the chief commissioner of land acquisition before taking over as the coal secretary in 2004.

Rakesh Dubey

A lot has been said about the alleged discrepancies in the allotment of captive coal blocks. You were holding the most important position at that juncture. What do you feel could have gone wrong, that led to the current controversy?

Initially, when a number of applicants per block were few, it was not difficult for the Screening Committee to make the right choice. As the number of applications started increasing and several companies fulfilled the eligibility criteria, selection was bound to become subjective.

It is said by some that the current controversy over allotment of coal blocks is nothing but a political issue. What are your views on this?

The controversy arose out of a report of the Comptroller & Auditor General of India (CAG), which is not a part of the political system. It will be unfair to the CAG if this matter is dismissed as merely a political issue.

Assuming that there might have been some oversight on the part of the screening committee in the verification of applications that allegedly run into several hundred pages from each applicant, what would have prompted the state governments to recommend various cases for allotment?

The Screening Committee was not expected to go through all the voluminous supporting documents. That was the responsibility of state governments, concerned ministries, CMPDIL, CIL etc. The Screening Committee went by the facts presented before it by respective officers.

It is said that e-auction would have been the best way for allotment of the blocks. What, according to you, could have prevented the government from not adopting such a system back then?

There is no doubt that e-auction would have been the best way for allotment of coal blocks. Apart from many other factors, I proposed open bidding for the following reasons.

* When there are several equally eligible contenders, open bidding is the most transparent and fair method of selection.

* As coal that is to be extracted from captive blocks would be far cheaper than that obtained from CIL or imports, allocation of captive blocks free of cost was discriminatory.

* As coal that is to be extracted from captive blocks would be far cheaper than that obtained from CIL or imports, allocation of captive blocks free of cost was discriminatory.

To my mind, there was no political will to adopt open bidding.

What are your views on the CAG’s observation of the `185,000-crore loss to the nation through allotment of captive blocks? Do you think the figure mentioned in the CAG report is close to the real figure?

With the available data, this was about the best the CAG could have done. These estimates are not wide off the mark. If the bidding route was adopted, actual revenue could have been more or less, depending on the state of the economy and market conditions at the time of the auction. More important than the figure of the loss, however, is the lack of fair play and equity in the allocation process.

Many feel there would not have been any issues had the significant portion of the allotted blocks come into production as per schedule. Do you feel delays in getting statutory clearances were the main reasons for the delay in starting production…?

Given the current scarcity of coal in the country, I do not think anyone is sitting on the property in the hope of future gains. The way the governments, both at state-level and the Centre, work in our country, it is almost impossible to bring a coal block into production in less than 10 years.

What, according to you, the government should have done to avoid the current controversy?

The government should have introduced open bidding, in 2004 itself, soon after the Prime Minister approved the proposal, and should not have continued with the Screening Committee route.

Many in the industry argue that the recent process, wherein the Inter-Ministerial Committee (IMC) recommended de-allocation of even those blocks where significant investments have already been made on end-use plants, is not correct. What do you feel about this?

I am unable to understand as to how the government can indulge in such a counter-productive exercise. What the IMC is doing is totally arbitrary and against national interest. It will worsen the crisis of coal availability in the country. We will be forced to import more coal, adding to the problems of inflation and balance of payment.

The IMC has been making recommendations for de-allocation, without examining as to who is responsible for the delay. In my view, instead of recommending de-allocation, the IMC should become a facilitator and co-ordinate with regulatory agencies for faster statuary clearances, so that production starts without further loss of time.

De-allocation will only lead to unnecessary litigation and further delay in production of coal

It is also said that the government should de-allocate all the blocks, which have not come to production as per schedule, and then putting them up for allotment through the auction route would be an ideal way to solve the problem?

Most blocks have not come into production on account of problems related to land acquisition and statutory clearances and not for fault of the allottee. It is unfair to selectively de-allocate blocks for no fault of the allottee.

One possible solution is to remove restrictions of captive mining, put all blocks allotted post -2004 to open bidding, after declaring their current status and all the investments that have already gone into the projects. The highest bidder will pay the investment already made to the current owner of the block and any surplus will accrue to the government. Current owners of blocks should have the right to retain the block at the highest bid.

I do not know how practical it will be, but it will be objective, transparent and fair to all concerned.

It is said that some companies have earned windfall profits by getting captive coal blocks as they were selling their end-products (power, cement, sponge iron, steel) at market-determined prices that provided them an edge over their competitors. What is your view?

It is true. This was one of the reasons for proposing the open bidding route.

It is felt the current controversy related to coal block allotments will last till the next general election after which everything will be forgotten. What do you feel, considering the way the issue has grabbed headlines during the past two years? Do you think it would be possible to put this on the back-burner?

Since this matter is being monitored by the Supreme Court, it may not be possible to put it on the back-burner. At the same time, I am not hopeful of any meaningful investigation of the case by the Central Bureau of Investigation (CBI).

Looking from the current position, do you think the controversy could be settled amicably?

Some people have suggested cancellation of all the captive blocks. This will be a remedy far worse than the disease. Coal blocks are not similar to spectrum, where the Supreme Court ordered cancelled all licences. In coal blocks, large investments of money and time have gone in acquisition of land, forest and environmental clearances and other ancillary activities and in setting up of end-use plants. Cancellations of blocks will worsen the already critical coal supply situation in the country and harm the economy.

You are credited with the introduction of e-auction at Coal India Limited (CIL), which, to a great extent, ended the clout of unscrupulous people in the coal industry and brought in transparency in the way the commodity is sold to non-linked consumers. How do you feel about this?

E-auction was the first step in the direction of bringing in a transparent pricing system and creating a robust spot and futures market for coal in the country. Unfortunately, e-auction has not moved beyond its first stage.

How do you see the future of e-auction of coal in India… Has it helped CIL find a system for price discovery, reduced the impact of middlemen and has allowed almost everybody to buy and sell coal, especially at a time when state governments or state-owned power generators appear to be not in favour of continuation of this platform?

India is an energy-deficit country and will have to depend on large imports of oil and gas and, to some extent, coal, in the foreseeable future. It is, therefore, necessary for us to have an integrated energy pricing policy, which is market-determined and linked to international prices. State-owned power generators should improve efficiency of production and use of energy, rather than ask for artificially low coal prices.

If there is no e-auction, from where will the consumers who do not have linkages from CIL obtain the coal they require?

Finally, do you think India should allow the entry of renowned foreign mining companies into coal mining and also give them the right to sell such coal in the open market, subject to proper checks and balances?

India should have opened up the coal sector to commercial mining to Indian and foreign companies long back – when it had opened up the power sector. Captive mining is a flawed policy and the government should open up the sector as soon as it can.

What advice do you have to offer to the government to come out of the present mess?

On account of the lack of transparency in the mining sector, be it coal or iron ore, the government’s image has been severely damaged. Enquires, investigations and court cases have brought the entire mining sector virtually to a halt. The new land acquisition and MMDR Acts will further add to the problems.

In the overall interest of the economy, the government has to take a holistic view and provide balance in the interest of all stakeholders and not put one against the other. The entire mining sector needs a re-look and a more practical approach.